H2O AMERICA

The Board has unanimously approved, and recommends that stockholders approve, an amendment to the Corporation’s Certificate of Incorporation (the “Certificate of Incorporation”) to permit officer exculpation (the “Officer Exculpation Amendment”).

Effective August 1, 2022, the State of Delaware, which is the Corporation’s state of incorporation, adopted amendments to Section 102(b)(7) of the Delaware General Corporation Law (the “DGCL”) that enable Delaware corporations to limit the liability of certain of their senior officers in limited circumstances. Prior to this, Section 102(b)(7) permitted Delaware corporations to exculpate directors from personal liability for monetary damages associated with breaches of the duty of care, but that protection did not extend to a Delaware corporation’s officers. In light of this update and after careful consideration, the Board is proposing to amend Article XI of the Certificate of Incorporation in order to permit exculpation of certain of the Corporation’s senior officers to the extent permitted by the DGCL. As a result of such Officer Exculpation Amendment, both directors and officers would be protected from monetary liability for fiduciary duty breaches to the extent permitted by the DGCL.

As amended, Section 102(b)(7) of the DGCL only permits, and thus, our proposed Officer Exculpation Amendment would only permit, exculpation of officers for direct claims (as opposed to claims brought by the Corporation itself or derivative claims made by stockholders on behalf of the Corporation). In addition, as provided in Section 102(b)(7) of the DGCL, exculpation is not permitted for either directors or officers in connection with (i) breaches of the duty of loyalty, (ii) acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or (iii) any transaction in which the director or officer derived an improper personal benefit.

Reasons for the Proposed Amendment

The Board believes that adopting an officer exculpation provision that is aligned with Delaware law would enhance our officers’ ability to make value-enhancing decisions for the Corporation and its stockholders. Our senior officers are often called upon to quickly respond to time-sensitive challenges and opportunities which, in the current litigious environment, carry with them a risk of costly claims, actions, suits or proceedings, regardless of the merit of the claims. Limiting concern about personal financial risk would empower such officers to best exercise their business judgment in furtherance of stockholder interests while minimizing the potential distraction posed by frivolous lawsuits and related costs that are often incurred by the Corporation either directly, through indemnification, or indirectly through higher insurance premiums. The Board also believes that the proposed Officer Exculpation Amendment would not negatively impact stockholder rights in that it would continue to allow cases with merit to proceed with respect to breach of fiduciary duty claims that fall outside of the narrow scope of Section 102(b)(7) of the DGCL. Further, the Board anticipates that similar officer exculpation provisions are likely to continue to be adopted by the Corporation’s peers and others with whom the Corporation competes for executive talent. As a result, failing to adopt such a provision could adversely impact the Corporation’s ability to attract and retain highly qualified officer candidates.

Therefore, taking into account the narrow class and type of claims for which officers’ liability would be exculpated under Delaware law, and the benefits the Board believes would accrue to the Corporation and its stockholders in the form of an enhanced ability to attract and retain talented officers and reduced costs, the Board believes that amending the Corporation’s Certificate of Incorporation to permit officer exculpation as described herein is in the best interests of the Corporation and its stockholders.

Proposed Amendment

Accordingly, for the reasons set forth herein, the Board is asking our stockholders to approve the proposed Officer Exculpation Amendment to the Certificate of Incorporation, which, upon approval, would amend and restate the first paragraph of Article XI of the Certificate of Incorporation to read as follows (with additions to the Article indicated by underlining and deletions indicated by strikeouts):

To the fullest extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, ano directoror officer of the Corporation shallnotbe personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a directoror officer. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a directoror officer of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

The remaining paragraphs of Article XI of the Certificate of Incorporation will not be amended or changed in any way. A copy of the proposed amendment to Article XI of the Certificate of Incorporation to permit officer exculpation is included as part of the proposed certificate of amendment (the “Certificate of Amendment”) attached to this proxy statement as Appendix A.

Approval of this Proposal 3 requires the affirmative vote of the holders of a majority of the Corporation’s common stock outstanding and entitled to vote at the Annual Meeting. If stockholders approve this Proposal 3, the Officer Exculpation Amendment will become effective upon the filing of the related Certificate of Amendment with the Delaware Secretary of State, which we anticipate filing as soon as reasonably practicable after the Annual Meeting. If this proposal is not approved by our stockholders, Article XI of the current Certificate of Incorporation will not be amended and no exculpation will be provided for our officers.

Consequences of Vote

The Officer Exculpation Amendment is separate and operates independently from the Federal Forum Selection Amendment discussed in Proposal 4. Therefore, if stockholders approve this Proposal 3 but not the Federal Forum Selection Amendment discussed in Proposal 4, a copy of the Certificate of Amendment that includes only the Officer Exculpation Amendment will be filed with the Delaware Secretary of State. In addition, we may file a Restated Certificate of Incorporation to integrate the Officer Exculpation Amendment (if approved), the Federal Forum Selection Amendment (if approved) and other prior amendments made to the Certificate of Incorporation into a single document.